BA 235 - SERVICES MARKETING

•  Course Objectives and Introduction

•  Part 1a: Nature & Structure of the Services Industry
•  Part 1b: Consumer Decision Making Process in Services
BA 235 - Course Objectives
n  Acquire a better understanding and appreciation of
the nature, structure and dynamics of the services
industry

n  Distinguish services marketing from other types of

marketing

n  Appreciate key trends, developments and challenges

in services marketing

n  Utilize
critical and analytical skills and apply
fundamental marketing principles in case studies and
course work

n  Becomemore conscious and discriminating service

customers
Textbook References

n  Services Marketing: People, Technology, Strategy

7th Edition - Christopher H. Lovelock & Jochen Wirtz (2011)
Pearson Prentice-Hall

n Understanding Services Marketing

4th Edition - John E.G. Bateson and K. Douglas Hoffman (2012)
Cengage Learning
Course Outline & Methodology
Introduction & Leveling of Expectations

Part 1: Overview of Services Marketing (3 sessions)

Part 2: Applying the Marketing Mix to Services (10 sessions)

Mid-Terms (Parts 1 & 2)

Part 3: Implementing Services Marketing Strategies (4 sessions)

Case Study Presentations (No. of Sessions TBD)*

Panel Discussions (No. of Sessions TBD)*

Finals (Part 3 + Integration of Case Studies & Panel Discussions)

*Guidelines, Mechanics and Schedule to follow

Assessment / Grading System

Grade Component
1 Examinations (Mid Terms + Finals) 30%
2 Case Work / Presentations 20%
Group Project: 20%
3 Organizing a Panel Discussion with
Service Industry Practitioners
Class Participation / Attendance / 30%
4
Quizzes
TOTAL 100%
Leveling of Expectations
BEGIN WITH AN END IN MIND.

1) What do you expect to achieve from this course?

2) What do you think is the best way to learn from
this course?
3) What behaviors do you expect from your
instructor and classmates?
4) How can we make learning more INTERESTING?
Let’s come up with a LEARNING COVENANT.
Part 1a
Nature & Structure of the Services Industry
Part 1a:
Nature & Structure of the Services Industry
1) Why Study Services?

2) Understanding the Nature of Services

3) Scale of Market Entities

4) Service Categories from a Process Perspective

5) The Servuction Model

6) Factors Affecting the Service Economy

7) Beyond 4Ps: Marketing Mix Applied to Services

8) Services Marketing: Core Strategies

Why Study Services?
n  Phenomenal growth of the services sector on a global
and local scale

n  In
most countries, the Services Sector has dominated
Agriculture and Manufacturing in its contribution to
gross domestic product (GDP) and job creation

n  Services permeate every aspect of our lives

The Services Sector in the Philippines
Comparative* Service Sectors:
Gross Domestic Product (GDP) Hong Kong (93%)
Share by Sector (2016) Macau (90%)
UK (80%)
USA (80%)
Singapore (74%)
Agriculture Japan (72%)
12% Brazil (72%)
Canada (70%)
Australia (69%)
GLOBAL (63%)
Services Industry
31% Argentina (60%)
57% South Korea (60%)
Philippines (57%)
Malaysia (54%)
China (50%)
Saudi Arabia (52%)
Indonesia (45%)
Qatar (44%)
*2014-2015 estimates from the CIA World Factbook Data
 The Services Sector in the Philippines
Facts & Figures (2014):

•  A total of 20.7 M Filipinos were employed in Services

•  About 599,000 Jobs were generated by the Services Sector
•  Services contributed 53.6% to the total Employment
•  Services Sector posted year-on-year growth of 6.0%, and grew
an average of 6.4% in 2010 - 2014

Source: http://www.neda.gov.ph/wp-content/uploads/2015/11/APEC-primer-on-services_comp4.pdf
Philippine Services Sector Overview
Services that Facilitate Exchange
•  Wholesale & Retail Trade
•  Information and Communications
•  Financial Intermediation and Insurance
•  Real Estate Activities
Services that change the Condition of a Good or Product
•  Repair of Motor Vehicles & Motorcycles
•  Professional, Scientific and Technical Activities
•  Transportation and Storage

Services that change the Physical or Mental Condition of People

•  Accommodation and Food Service Activities
•  Administrative and Support Service Activities
•  Public Administration and Defense
•  Education
•  Human Health and Social Work Activities
•  Arts, Entertainment and Recreation
•  Activities of Extraterritorial Organizations and Bodies
•  Activities of Households as Employers

Source: www.neda.gov.ph
Understanding the Nature of Services
n  SERVICES are deeds, efforts or performances that
bring about desired results or experience for the
customer

n  SERVICES are typically time-based economic activities

rendered by one party to another

n  In exchange for their money, time and effort, service

customers expect to obtain value from:
n  Access to goods, labor, facilities, environments,
professional skills, networks, and systems;
n  Normally DO NOT TAKE OWNERSHIP of any of the
physical elements involved.

n  The distinction between goods and services is not

perfectly clear.
Understanding the Nature of Services

Five Categories within the Non-Ownership Framework

of which two or more elements may be combined:

LABOR &
RENTED GOODS
EXPERTISE
& SERVICES
RENTALS
DEFINED SPACE &
PLACE RENTALS
ACCESS TO ACCESS TO &
SHARED USAGE OF
PHYSICAL SYSTEMS &
ENVIRONMENTS NETWORKS
Scale of Market Entities
The scale that displays a range of products along a
CONTINUUM based on their tangibility
TANGIBLE DOMINANT
Goods that possess physical properties that can be felt,
tasted and seen prior to the consumer’s purchase decision
Salt Soft
drinks Detergents
Automobiles
Cosmetics
Fast Food
Outlets

Fast Food
Outlets Advertising
Agencies Airlines Investment
Nothing is purely Product or
Management
purely Service Consulting
Teaching

INTANGIBLE DOMINANT
Services that lack the physical properties that can be sensed
by consumers prior to the purchase decision
Service Categories from a “Process” Perspective

Who or What Is the Direct Recipient of the Service?

Nature of the
Service Act
PEOPLE POSSESSIONS

PEOPLE PROCESSING POSSESSION PROCESSING

(Services directed at people’s (Services directed at Physical
TANGIBLE bodies) Possessions)
ACTIONS •  Passenger Transportation •  Freight Transportation
•  Health Care •  Car Repair and Maintenance
•  Salon / Spa •  Laundry and Dry Cleaning

MENTAL STIMULUS
INFORMATION PROCESSING
PROCESSING (Services directed at intangible
(Services directed at People’s Assets)
INTANGIBLE Minds)
ACTIONS •  Accounting
•  Education
•  Banking
•  Advertising / PR
•  Legal Services
•  Psychotherapy
The “Servuction” Model
a FRAMEWORK for understanding visible and invisible factors that
influence the consumer’s service experience
SERVICESCAPE
Use of physical evidence
OTHER CUSTOMERS (ambient conditions,
Can enhance or detract furnishings, signs, symbols)
from an individual’s to design service
service experience environments

CUSTOMER

INVISIBLE
CONTACT PERSONNEL /
ORGANIZATIONS & SERVICE PROVIDERS
SYSTEMS Employees who interact
Rules, regulations and with the customers
processes upon which the
organization is based
Factors Affecting the Services Sector
Social Changes Business Trends Advances in IT

Govt Policies Globalization

•  New Markets and Product Categories
•  Increase in Demand for Services
•  More Intense Competition

Innovation in Service Products & Delivery Systems,

Stimulated by Better Technology

Customers have more Choices and Exercise more Power

Success hinges on: (1) Understanding Customers and Competitors

(2) Viable Business Models
(3) Creation of Value for Customers and Firm

INCREASED FOCUS ON SERVICES MARKETING

Factors Affecting the Services Sector
Social Changes Business Trends Advances in IT

Govt Policies Globalization

•  Changes in Regulations
•  Privatization
•  New Rules to Protect Customers,
Employees and the Environment
•  New Agreement on Trade in Services
Factors Affecting the Services Sector
Social Changes Business Trends Advances in IT

Govt Policies Globalization

•  Rising Consumer Expectations

•  More Affluence
•  Personal Outsourcing
•  Increased Desire for Buying Experiences vs. Things
•  Rising Consumer Ownership of High Tech Equipment
•  Easier Access to more Information
•  Migration
•  Growing but Aging Population
Factors Affecting the Services Sector
Social Changes Business Trends Advances in IT

Govt Policies Globalization

•  Push to increase Shareholder Value

•  Emphasis on Productivity and Cost Savings
•  Manufacturers Add Value Through Service and
Sell Services
•  More Strategic Alliances and Outsourcing
•  Focus on Quality and Customer Satisfaction
•  Growth of Franchising
•  Marketing Emphasis by Non-Profits
Factors Affecting the Services Sector
Social Changes Business Trends Advances in IT

Govt Policies Globalization

•  Growth of the Internet

•  Greater Bandwidth
•  Compact Mobile Equipment
•  Wireless Networking
•  Faster, more Powerful Software
•  Digitization of Text, Graphics, Audio, Video
Factors Affecting the Services Sector
Social Changes Business Trends Advances in IT

Govt Policies Globalization

•  More Companies operating on

Transnational Basis
•  Increased International Travel
•  International Mergers and Alliances
•  “Offshoring” of Customer Service
•  Foreign Competitors Invade Domestic
Markets
Services Marketing Mix: Beyond 4Ps
n  Service Product: core service + supplementary elements

n  Place & Time: physical or electronic distribution platform;

time as a crucial element in service delivery

n  Price: value exchange between service provider & consumer

n  Promotions: communicating the service value & benefits to

induce action from the consumer

----------------------------------------------------------------------------------

n  Process: designing how the service is delivered (interface)

n  Physical Environment: the servicescape (visible cues)

n  People: who delivers the service & interacts with consumer

(actual or virtual)
Services Marketing: Core Strategies
n  Managing Relationships and Building Loyalty
n  Customer Loyalty & Retention
n  Customer Relationship Management (CRM)

n  Complaint Handling & Service Recovery

n  Understanding the Nature of the Complaint
n  Crafting Effective Responses towards Service Recovery

n  Designing Service Guarantees

n  Improving Service Quality and Productivity

n  Learning from Customer Feedback
n  Measuring Productivity and Service Quality

n  Aiming for World Class Customer Service

Part 1b
Consumer Decision Making Process
in Services
Consumer Decision Making Process Model

1 2 3
PRE-PURCHASE CONSUMPTION POSTPURCHASE
STAGE STAGE STAGE

EVALUATE
PROBLEM INFO EVALUATE CHOICE
STIMULUS POST-
AWARENESS SEARCH OPTIONS PURCHASE
 1
Key Concepts: Pre-Purchase Stage
Factors Influencing Customer Expectations of Service

Personal Needs Desired Service - Explicit & Implicit

Type of services Service Promises
customers hope to - Word of Mouth
receive - Past Experience
Beliefs About
What is Possible ZONE OF
TOLERANCE
Extent to which
customers are willing
to accept the variation
in service levels

Perceived Service
Alterations Adequate Service Predicted Service
Minimum level of Level of service
service customers will customers actually
accept without being anticipate receiving
Situational Factors dissatisfied
Key Concepts: Service Encounter Stage 2

Service Encounter – Period of time during which a

customer interacts directly with a service provider.

“Moment of Truth” – a metaphor that refers to a

customer’s touch points that can make or break a
customer relationship.

High Contact Services – entails interaction throughout

the service delivery between customers and the
organization.

Low Contact Services – involve little, if any, physical

contact between customers and service providers.
Key Concepts: Service Encounter Stage 2
Levels of Customer Contact with Service Organizations

Emphasizes
HIGH Encounters with
* Bruno’s Barbershop
CONTACT * St. Luke’s Service Personnel

*EDSA Shangri-La
* SGV & Co
* Vikings
* Jollibee Delivery
* Philippine Airlines
* BDO
* The Spa * Honda Cars
* Sun Life
* FabriCare
* McDonald’s * Ayala Cinemas * Sky Cable

* MRT / LRT * BPI Express Online

LOW
Emphasizes * Zalora / Lazada CONTACT
* Netflix
Encounters with
Physical Service * Viber
Elements
Key Concepts: Service Encounter Stage 2
THEATER as metaphor for Service Delivery
•  Service Delivery consists of a series of events or “performances” that
customers experience
•  Service Facility is the “stage” – minimal vs. elaborate
•  Service Facility and Equipment are the “props”
•  Service Personnel are the “actors”

ROLE THEORY
•  Employees and customers “act out” their parts in the performance
according to predetermined roles.
•  Role Congruence - the extent to which each person acts out his or her
prescribed role during a service encounter to achieve satisfaction and
productivity of both parties.

SCRIPT THEORY
•  Service Script – specifies the sequences of behavior that employees and
customers are expected to learn and follow during service delivery.

Role and Script Theories are complementary and are used to design, train,
communicate and manage both employee and customer roles and scripts.
Key Concepts: Post-Encounter / Post-Purchase Stage
SERVICE PERFORMANCE VS. PRIOR EXPECTATIONS 3
During the Service Encounter, customers experience the Service
Performance and compare it to their predicted Service Levels.

CUSTOMER SATISFACTION JUDGEMENTS

Confirmation – if service is as expected
Positive Disconfirmation – if service is better than expected
Negative Disconfirmation – if service is worse than expected

CUSTOMER DELIGHT is a function of three (3) components:

(1) Unexpectedly High Performance Levels
(2) Arousal (e.g., surprise, excitement)
(3) Positive Affect (e.g., pleasure, joy, happiness)
Customer Delight = Positive Disconfirmation + Pleasure & Surprise

But take note: Exercise caution in exceeding customers expectations

on a continual basis, as research points out that reaching for
unobtainable objectives may backfire. Such efforts often come close
to the point of diminishing returns.
THANK YOU!
QUESTIONS?